Interserve, which provides a range of support services to public sector organisations, said that local authorities had yet to address the need to cut costs.
In its 2012 financial results statement, the company said: “The UK market for outsourced services is not yet exhibiting the full growth potential that was expected to result from the government’s austerity programme and from continued private sector efficiency drives. While there is still a reasonable flow of opportunities, we have not yet seen the anticipated shift in thinking, particularly among local authorities, that will lead to a more structural approach to outsourcing as a way to maintain services while addressing costs. Meanwhile clients seek to restrain discretionary spend, resulting in some volume pressure.”
Despite this, the construction-to-cleaning concern reported healthy results for the year to 31 December 2012, prompting chief executive Adrian Ringrose to say: “This was a good year for Interserve. We grew earnings, generated strong cash flow and made good strategic progress in entering new markets.”
Gross revenues rose 2% to £2.32bn (2010: £2.31bn) and pre-tax profit was up 4.7% to £67.1m (2010: £64.1m). Net debt was cit from £53.8m to £44.2m.
Mr Ringrose added: “We made further excellent advances in increasing the margins in Support Services and are on track to reach our target for the division of 5 per cent by the end of 2013. Construction has done well both in the UK and internationally in a tough market where margin pressure and increased competition have had an effect. Equipment Services is emerging from the bottom of the cycle in good shape, improving margins and making a good return on capital.
“We won over £2 billion of work during the year, expanding our future workload to £5.6 billion. We anticipate stable trading in 2012, with pressure on Construction being balanced by further improvements in Support Services’ margins and recovery in Equipment Services. Looking further ahead, with good potential in our existing markets, expansion into new markets and our strong balance sheet, our medium-term growth prospects are strong.”
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